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Stock Acquisition - Subsequent To DOA

The consolidation procedures subsequent to the date of acquisition are similar to the initial consolidation. Each year begins as if no previous consolidation occurred. Intercompany transactions must be eliminated. The steps include: 1) Eliminating dividends between subsidiary and parent/NCI. 2) Eliminating subsidiary equity accounts against investment/NCI on acquisition date. 3) Allocating excess cost to identifiable assets at fair value. 4) Amortizing excess allocation. 5) Recognizing NCI in subsidiary income. Items to verify include: NCI in income/net assets of subsidiary, consolidated income attributable to parent, and consolidated retained/stockholders' equity.

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586 views2 pages

Stock Acquisition - Subsequent To DOA

The consolidation procedures subsequent to the date of acquisition are similar to the initial consolidation. Each year begins as if no previous consolidation occurred. Intercompany transactions must be eliminated. The steps include: 1) Eliminating dividends between subsidiary and parent/NCI. 2) Eliminating subsidiary equity accounts against investment/NCI on acquisition date. 3) Allocating excess cost to identifiable assets at fair value. 4) Amortizing excess allocation. 5) Recognizing NCI in subsidiary income. Items to verify include: NCI in income/net assets of subsidiary, consolidated income attributable to parent, and consolidated retained/stockholders' equity.

Uploaded by

Shekinah Grace Santua
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Consolidated Financial Statements –Subsequent to Date of Acquisition

CHAPTER 15
Consolidated Financial Statements –Subsequent to Date of Acquisition
IFRS 10
I. DISCUSSION
The consolidation procedures to be used at the end of the second year, and in periods
thereafter, are basically the same as those used at the end of the first year. In essence, each
year’s consolidation procedures begin as if there had never been a previous consolidation.
PFRS 10 requires that all intercompany transactions must be eliminated before the
preparation of consolidated financial statements.
The elimination procedures to prepare consolidated financial statements on a date subsequent
to the date of acquisition are summarized below:
1. Eliminate dividends declared by the subsidiary against dividend income and NCI
share.
2. Eliminate subsidiary equity accounts against the investment account and the NCI
share as of the date of acquisition.
3. Allocate excess between the aggregate of NCI, price paid by the parent, and
previously-held interest and the book value of the identifiable net assets of the
subsidiary. This is done by adjusting the book value of the net assets to their current
fair value.
4. Amortize allocated excess.
5. Recognize NCI in net income of subsidiary.
In the consolidated financial statements, the following items should be verified
1. NCI in comprehensive income of subsidiary
2. NCI in net assets of subsidiary
3. Consolidated total comprehensive net income attributable to parent
4. Consolidated retained earnings
5. Consolidated stockholders’ equity

Working paper Elimination Entries (WPEE):


1. To eliminate intercompany dividends and minority interest share of dividends
2. To eliminate equity accounts of subsidiary and the investment account for the parent’s
share and recognize NCI on date of acquisition
3. To allocate excess between investment cost and the book value of identifiable assets
acquired with remainder to goodwill
Consolidated Financial Statements –Subsequent to Date of Acquisition

4. To amortize the allocated excess to identifiable assets


5. To recognize the NCI in subsidiary’s adjusted net income for the current year
6. To assign to the non-controlling stockholders their share of the increase in the
subsidiary’s adjusted undistributed earnings that occurred between the acquisition
date and the beginning of the current period.

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